Upstart Loans Versus Prosper

There are many new start-ups in the lending world these days, but Upstart is one of the most interesting. Not only does it cater to recent graduates who need financial help, but it also specializes in funding tuition costs with student loans for those who are interested in learning how to code. This makes it a perfect lending option for young techies who not only want to get a head start on their career, but also their finances.

How Does Upstart Work

Even though their approval criteria may be a bit unconventional, Upstart operates very similarly to a traditional loan process. You go online and fill out a form that asks you for some personal and financial information. It will then send you an estimated rate for your loan. If you agree with the rate, Upstart will gather more information and prepare the loan paperwork to make it official. Once the loan is approved, you will get the money the next business day.

The approval process is a little bit different though. Upstart does look at things like credit score, employment income and income-to-debt ratio, but it also uses computer models to factor in your college degree, your major and your job history to give Upstart a fuller picture of who you are as a financial person.

These extra criteria are perfect for someone who doesn’t have much credit history but has shown great responsibility in school and previous jobs. It speaks to the problem that a lot of people have with credit scores; they don’t give the whole picture on how financially responsible a person is.

Upstart also makes it easy to set up recurring payments, and won’t penalize you for paying off your loan early, which many loan companies do. Upstart offers both three-year and five-year personal loans, so you can choose which will be easiest for you to pay off. It also offers a range of options, from student loans to debt consolidation loans.

Is Upstart Legit?

While Upstart is only 5 years old, it has been busy in those five years. It has funded more than $700 million in lending so far, and has approved 60,000 loans. Upstart is also one of the only online lenders to completely automate a portion (25 percent) of its loans, which means both the approval process and loan funding are all down through algorithms and artificial intelligence.

It was founded by two ex-Google employees and is backed by Cross River Bank, which is backed by the FDIC, so you know your money is safe. It is also consistently rated as one of the top online loan companies operating today.

Common Upstart Reviews

Upstart may handle online lending in an unconventional way, but its users tend to love the service. Customer service reviews on sites like Credit Karma and TrustPilot give mostly five out of five star ratings to Upstart, with glowing reviews on everything from Upstart’s quick and easy online process to its exemplary customer service.

Most of the negative reviews on these sites seem to be from people who didn’t understand the process, wanted to cancel the loan after it was approved or were upset about being charged late fees. As with any financial service, always read the fine print before agreeing to anything, although Upstart is pretty upfront about all of their fees and rates.

From a consumer product review standpoint, Upstart is generally ranked near the top of the reviews because of its ability to lend to people who might not normally qualify.

Is Upstart Right For You?

There are hundreds of loan providers available now, so how do you know if Upstart is the right one for you? It really comes down to a few simple questions:

  • Do you have excellent credit?
  • Do you have average credit?
  • If so, have you graduated in the past four years?
  • Do you have a good job history?
  • Are you looking for student loans that are different than traditional lending?

If you have excellent credit, the world is your oyster when it comes to loans, so you can really choose any lender and be approved for a loan. The issue for people with excellent credit isn’t whether they can get approved or not, but rather what the interest rate is going to be. With Upstart, a good academic record coupled with excellent credit could score you a very low interest rate. If that’s not the case, you might be able to find a lower interest rate elsewhere.

If you have average credit, Upstart might be a good place to start. People with average credit or very little credit history can often have issues securing a loan, so lenders like Upstart that look at outside factors when approving you can only help.

The caveat to this is that if you haven’t graduated in the past four years, Upstart generally won’t look at your academics as a factor, which leaves you back where you started. In addition, if your grades were poor, you might also have issues getting approved. Luckily, Upstart also looks at your job history, so if you have had a steady job for many years with good standing, you might also have a good chance of being approved.

The point is that there are many different factors that Upstart uses when approving candidates, so if you’ve been turned down for other loans, you should take a look at Upstart.

Prosper was one of the first peer-to-peer lending services, along with Lending Club, and one of the few originals to still be thriving. Peer-to-peer lending just means that ordinary people are not just the ones borrowing from Prosper, they are also the ones who fund the loans through investments. Basically, anyone can sign up to invest (after being approved by Prosper) and can choose to fully or partially fund any loan application that comes in.

How Does Prosper Work

Prosper works very similarly to Lending Club. You fill out an application online with personal and financial information. Once you submit that application, Prosper will assign your request a ranking that will help determine your interest rate. You then can specify your loan requirements, and include any other pertinent information that you think can help you get approved. Prosper then sends loan details to its investors, who have 14 days to decide whether to fund the loan.

Investors can decide whether to fund a portion of the loan or the whole thing. Multiple investors can contribute to one loan. Once your loan is funded, your funds will be in your bank account by the next business day.

If your loan is not fully funded but is funded up to 70 percent of the original amount, Prosper will allow you to approve a partial loan for that amount, although the decision to take it or not is up to you. You can also cancel the partial loan and apply elsewhere for the full loan amount.

What Sets Prosper Apart

The first thing that sets Prosper apart from other online loan services is not necessarily a plus. Prosper has pretty high standards when it comes to who it is lending money to. Generally, people applying for a loan must have a good credit score, a pretty solid income and a very low debt-to-income ratio. The payoff for this is lower interest rates in general, but Prosper isn’t the best online loan service for someone with poor credit.

In addition, Prosper offers partial loans, which is common for peer-to-peer lending services. If investors only decide to fund a portion of your loan request, and the total is 70 percent or more of your total loan request, Prosper will offer you a partial loan instead, which you can accept, or cancel and try applying again.

Another plus for Prosper is its financial tracking app. The company offers an app that you can use to track your finances and keep an eye on your spending. The app also will alert you if you have bills or subscriptions that you don’t need, so you can cancel and save money.

Like most other online loan services, Prosper offers both three-year and five-year loans. Terms of repayment are laid out in the loan agreement you sign.

Common Prosper Reviews

Generally, Prosper does well in professional consumer product reviews, usually getting at least four out of five stars. It’s no surprise, since Prosper has reasonable rates, proper funding and offers partial loans and financial education tools. The one downside most professional reviewers found was Prosper’s high standards when it comes to approving borrowers.

Customer reviews for Prosper are very similar. The company ranks 4.5 out of five stars on Credit Karma, with more than 300 Prosper customers leaving reviews. Most positive reviews talk about how fast and easy the service is, as well as how Prosper approved them when other banks had denied their loan request. Customers also seemed to like the payment process.

Negative reviews seem to focus on early repayment of loans. Although Prosper doesn’t charge an early payment fee, many consumers have apparently had problems with trying to pay back their loan early. Other negative reviews talk about the origination fee and high interest rates.

Is Prosper Right For You?

In a sea of stellar online loan services, Prosper can seem like the forgotten middle child of the family, but it actually has some great features that set it apart. Here are the questions to ask yourself when considering Prosper:

  • Do I have good credit?
  • Do I need the full amount of my loan?
  • Do I need help staying on top of my finances?
  • Do I have time to wait for the money?

Let’s be honest, Prosper requires a pretty good financial history in order to get approved for a loan. This can make it difficult for people with average or poor credit to be approved for even a partial loan. If you have average credit, there are other online loan services included in our reviews that would gladly accept you.

If you are not looking for an exact dollar amount or are OK taking what you can get, Prosper’s partial loan option might be good for you.

This is actually counter-intuitive since Prosper doesn’t usually approve people with money issues, but Prosper’s finance tracking app is a great tool to help you stay on top of your finances and make sure you are not paying for things you don’t need.

Like any peer-to-peer lending site, it is going to take a while to get approved for a loan. Once Prosper sends your loan application out to the investors, the investors have 14 days to decide whether to fund your loan. So if you don’t have more than two weeks to wait, this might not be the best service for you.